Q: There have been a lot of changes at Compaq recently, particularly in its distribution model. What is the reasoning behind these changes?
A: There's been a lot of hype and publicity surrounding Compaq on this issue. Mainly because people have been trying to convince us to announce the fact that we're going direct which we're not.
The change is just in one particular area which we call home and office, which will eventually be developed into the small and medium business area. In this market there is a perception that Compaq is too big, very difficult to deal with and too expensive.
The problem we had is that our route to market is through our corporate dealers and these orders are too small for those dealers to be interesting.
The result is that we're making very little penetration into a market which we see as one of the fastest growing at this time. We've invested around $20 million in a call centre in Glasgow to handle calls and we've begun an off-the-page advertising campaign. The main aim is to make these customers see that Compaq is available, we're not expensive and we'd love to do business with them.
Q:Have the changes to a more direct model enabled Compaq to gain a lot of new business?
A: The volume of calls we've had in the weeks following the launch have been slightly less than we thought. There could be two different reasons for this. The first is that through the months of July and August people are not really thinking about buying PCs. If I'm wrong about that then perhaps we haven't targeted our advertising properly. But we are only piloting one product range at the moment to make sure the infrastructure works. Come 2 October we will be going for this market in a big way.
Q: How much has the success of companies such as Dell and Gateway 2000 influenced Compaq's decision to move to a more direct model?
A: Definitely, but not so much in making the choice between direct and indirect, its all about becoming much more approachable to the market sector we're trying to target. The main difference between us and some of our competitors is that we may be taking the orders direct but we are fulfilling them through the channel.
Q:Given Dell's success in selling on the Internet, has Compaq got any plans to follow suit?
A: Absolutely, but Compaq is nowhere near the level that Dell is at the moment. To be honest, most of our major clients as yet wouldn't be interested. But I can see it happening sometime in the next 12 months.
Q: What has been the reaction from the channel to the changes in Compaq's selling strategy?
A: In terms of our core business, that is the corporate business which accounts for around 85% of our turnover and our channel, there's no change at all in the way we sell. In fact we're probably going to invest more money and more resources into that area to address service and support issues of some of our more sophisticated products.
Once the dealers understood what we were trying to do they were very happy about it. The market we're targeting is not one that these dealers want to sell into themselves.
As for our corporate customers, they are happy dealing with the channel.
Q: What exactly is happening in Europe with the "build to order" (BTO) programme recently launched in the US?
A: The rational behind BTO is that at the moment we build to forecast and the result of that is that everybody gets the forecast wrong - the user, the channel and Compaq itself.
We now believe we have the manufacturing capability to start BTO and access to the right assembly parts, particularly from Intel which in the past has always been difficult. With BTO we can reduce our inventory and the channel's inventory by half so each of us will gain financially.
With the new system we will continue to sell and support our products through the channel but it means we can respond to users needs much more quickly. The mechanism is in place at the moment and, subject to the support of our channel, we should be ready for the first orders in early January.
Q: A recent Forrester report slammed your merger with Tandem as a "dangerous and expensive mistake" because of Tandem's financial troubles and a lack of product and channel synergy. What is Compaq doing to address these fears?
A: It's true that Tandem doesn't have a channel, but look who has (Compaq)!
As far as a technological and product point of view I think the blend works extremely well. Tandem sells a lot of products in the financial market which we do too. It will also allow our channel to take advantage of Tandem's more high-end product offerings. It is by far our largest acquisition and the challenge will be to integrate the two companies properly.
Q: What do you see as the biggest challenge for Compaq over the next three years?
A: The main challenge will be how successfully our management can manage the growth of the company over the next few years. We need to understand the intricacies of other companies to fully understand what the hell we've acquired. The trick is to integrate the companies we've bought at the right time before we lose what each company has.
We are also currently perceived as a PC and not a computer company, and that needs to change.
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